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Investors’ Corner
Investors' Corner | 29 February 2008
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China Yuanbang reported a 24.8% decline in revenue and net profit dipped 90.7% in 1H08 due to fewer units sold in the period. Despite lower revenue, the Group recorded a 17.8% increase in gross profit as the units sold were of a higher ASP. GPM increased to 50.4% as compared to 32.1% last year. Aqua Lake had pre-sold 30k sqm of GFA and accumulated presales proceeds of Rmb154.9m. We expect this project to be a major contributor in FY08 earnings, as the units will be progressively handed over to the purchasers. Jinshazhou project, Wenchang project and Huadu project will commence construction in later half of FY08 and into FY09 once various building permits are obtained. Key risks include more tightening measures to curb prices, delay in construction due to pending approvals from various authorities or the recent weather hazards. However, we do not see any fundamental change in the business except for the possible risks stated. Reiterate BUY.

– Phillip Securities (11 Feb)


We factored contract wins of $200m and $100m for FY08 & FY09 respectively for its construction business, given that four of the Group’s existing projects are near completion and the acute shortage in reputable main contractors. We value Chip Eng Seng Corporation using sum-of-the-parts (SOTP) valuation methods, valuing its property developments and construction business. We have revised our earnings multiples, reflecting lower risk appetite due to market weakness, to 10x FY08F construction earnings from 15x previously. At this level, price target works out to $0.78, representing a slight decrease from our previous price target of $0.81 due to the inclusion of net present value of development profits from Elias Road Development while SOTP valuation is diluted due to share placement of 60.7m shares to Citadel Fund during the year and reduction in earnings multiple to 10x. Maintain BUY.

– Westcomb (11 Feb)


SNP Corporation registered a record PATMI of $29.3m for FY07, representing a 39% YoY increase. The strong growth in the Company’s bottomline came as a result of improvements seen in all business segments, particularly its Commercial Printing operations. Exclude the one-time net gain of $10.3m, SNP’s PATMI for its Continuing Operations in FY07 stands at $19m, representing a strong 241% YoY growth. Although one may expect the perceived slowdown of the US economy and the weakening of the US$ to affect SNP’s export business, we are of the view that the effect on the Company’s bottomline will not be substantial. The slow down for the export markets, if any, should be offset by growth in SNP’s colour magazines printing and paper-packaging printing in China. Finally, with the completion of a new printing factory in Beijing in 2HFY08, we expect further growth in net earnings from the Commercial Printing division by the beginning of FY09. Reiterate BUY.

– Phillip Securities (11 Feb)


While Synear’s products are not affected by recently implemented price controls in China, we do not expect the company to raise its ASPs in the near term. Depending on how long the winter storms last, deliveries for post-Chinese New Year sales could be affected, while high vegetable prices may eat into Synear’s gross margins. In addition, pork prices have jumped, leapfrogging the August high to Rmb21.8/kg, on strong festive demand. While we expect pork prices to ease after the festive period, we think the price decline is likely to be more gradual than originally expected. As a result of our expectations of firmer raw material prices, we have lowered our gross margin assumptions for FY08-09 to 29.7% and 30.8% respectively, from 32.5% and 35%. We remain bullish on Synear’s longer-term prospects. As a market leader in the quickfreeze food sector, it is in a position to benefit from China’s rapid urbanisation and growing affluence. Maintain OUTPERFORM.

– CIMB (11 Feb)


Chartered’s Q4 operating margin of -0.1% was lower than our forecast of 1.8%. We attribute this partly to: 1) less favourable product mix from lower shipment of 90nm, and 2) higher R&D expense associated with 45nm development. For Q1, Chartered guided for revenue to rise 2-6% QoQ, better than our estimate of down 10%. We attribute this to better strength in the wireless segment and the bottoming of its CPU business. Despite better revenue guidance, Chartered only guided for net income of US$0m (the mid point) in Q1, lower than our net profit estimate of US$11.5m. While Chartered aims to continue to focus on enhancing its leading-edge capabilities on advanced process nodes, we believe the technology gap will remain wide with leading industry players, such as TSMC. We attribute this to the inherent shortcoming in technology licensing. We see no immediate relief and expect Chartered to continue to play catch-up. We lower our price target from $0.92 to $0.85. Maintain NEUTRAL.

– UBS Investment (12 Feb)


FY07 net profit of US$522m was 4.4% ahead of our US$500m forecast but 16% ahead of consensus. Net profit was up 44% YoY, driven by a 12% YoY rise in liner volumes. Final dividend of $0.10/share announced, taking total dividend for the full year to $0.14/share. This is ahead of our expectations of $0.08 (last year’s number). Management expects growth in the US container trade lanes to moderate because of volatility in world financial markets and slowing US economy. However, they still expect continuing growth in trade links with Asian economies. Despite 20% stock price decline over the last 3 months, we are still cautious on earnings outlook because of (1) negative impact of a US slowdown. 55% of revenues in 2007 came from the Americas, (2) rise in fuel costs and progressive expiry of hedges in 2008, and (3) 11-12% p.a addition to global container fleet in 2008-09 causing downward pressure to freight rates. Currently trading at 1.2x FY08 price/book, this stock could trade below book value if newsflow from the US continues to be negative, in our view. Maintain SELL.

– Deutsche Bank (12 Feb)


Mercator Lines reported net profit of US$14.4m in 3Q08 which was up 494% from the US$2.4m net profit a year ago. Revenue was up 106% YoY. The large increase in net profit was due to an increase in capacity and higher charter rates. 9M net profit was US$28.6m compared with US$4.1m a year ago. We expect 4Q08 net profit numbers to be even stronger than 3Q as average rates achieved goes up. Recall that there were three COAs (Contract of Affreightment) which expired in the December 2007 quarter and we expect the vessels that were utilised on these COAs to now be earning much higher rates. We think the company is on track to achieving our US$46.9m net profit forecast. We expect net EPS for FY08 to be up 108% YoY. In the second half of 2008, we expect the BDI to be at higher levels compared to current levels, especially once iron ore negotiations are completed. This should improve sentiment on the stock. Maintain BUY.

– Deutsche Bank (12 Feb)


SingPost’s share price has fallen 5% but outperformed the MSCI (Singapore) by 12% ytd. We believe SingPost should remain resilient and continue to outperform the market amidst volatile market conditions due to (1) its attractive dividend yield, (2) high earnings visibility and decent growth potential. Key catalysts include: (1) upcoming 4QFY08 results (in Apr), which may remove overhang on further margin compression. We also believe SingPost’s earnings may surprise on the upside with stronger than expected revenue growth in direct mail services; (2) better visibility on reference access pricing may remove overhang on postal liberalization; (3) better clarity on regional strategies may remove M&A overhang; (4) management recently indicated publicly that it is exploring options to unlock the value of its head office building; based on a recent news article (Business Times) the estimated value implies net sale proceeds of up to $0.61/share. Upgrade to BUY.

– Goldman Sachs (13 Feb)

Singapore Post  0.935 +0.005 +0.54%   
Business: [FY19 Turnover] Post and Parcel (47.8%), logistics (31%), eCommerce (15.5%), property (5.7%).

Insight: May-19, FY19 revenue rose 2.9% to $1.6b largely du... Read More
Chip Eng Seng Corp  0.630 -- --   
Business: [FY18 Turnover] Property development (70.2%), construction (21.8%), hospitality (5.9%), Corporate, property investments & education (2.1%).

Insight: Feb-19, FY18 revenue increased 27% to $1.1b, contr... Read More

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